Q. Like many others, I recently received a "one-time-only offer" for a lump-sum distribution as a settlement for a vested defined-benefit pension. I am 58 years old. The lump sum offer is $250,000. The normal annuity benefit starting now is $1,489/month. At age 65 it would be $2,089.

If I take the distribution and buy an annuity with Fidelity, the monthly benefits are $1,185 and $1,700 respectively. I calculate that the "offer" is asking me to take a 20 percent haircut on my pension! Of course, I can simply take my normal monthly benefit through the pension. But if I do that I am accepting the risk of a future default by my former employer. If that happens, my future benefits would be at the mercy of the Pension Benefit Guaranty Trust Corporation.

So, here is my question: Is it worth 20 percent to eliminate the default risk of the normal pension plan? Are there other factors I am not considering? —S.O., by email

A. Before you take the reduced offer I suggest that you do two things. First, take a close look at the company you work for and the financial condition of the pension fund. If the company is profitable and the pension fund is well funded— at least 80 percent—then you should stick with the company plan and not take the haircut. Assuming the company you work for is publicly traded, you will find information on the funding status of the pension fund in the footnotes of the annual report.

Your next step is to assess your second line of defense: the Pension Benefit Guaranty Corporation. For 2012 the maximum monthly benefit under the PBGC for a 58 year old, according to their website, is $2,652. That’s well above the $1,489 you cited for your earned benefit. The PBGC guarantees fundamental benefits earned before the termination date of the plan or by the date of the company's bankruptcy proceeding. In the event of such events you are likely to lose health and welfare benefits, vacation pay, severance benefits, etc.— but your basic lifetime pension income will be safe.

Bottom line: If your company plan is close to fully funded you're better off sticking with your company pension.

Q. I am 86 years old. I rent an apartment for $3,100 a month plus utilities. The total averages $3,400 monthly. I do not own real estate or vehicles and I have no dependents. I'm considering moving into an all-inclusive retirement community. The average monthly fee is $4,000. I also have to pay an up-front fee but my estate upon my death will recover 90 percent of it.

My monthly income is $12,000 from a combination of Social Security and a company pension. I have about $1.3 million in financial assets—annuities, mutual funds and certificates of deposit. Should I plan on liquidating $400,000 cash as my deposit and not touch the mutual funds or annuities? Is there another approach to paying this entrance fee? —PJW, Austin, TX

A. You've made a good decision— the continuing care retirement community model is a good one. I wish more seniors would consider it, although many balk at the monthly expense.
As a practical matter, a CCRC provides a lot more in its monthly cost than the simple costs of shelter. Lots of bills you have as a renter will disappear. In a recent speech in Oregon, for instance, I compared the cost of a CCRC or owning a house to the difference between what a high-priced luxury cruise actually costs and a cruise line known for lower prices. In the end, the total out-of-pocket costs for both cruises may be the same.

Why? Because the high-priced cruise included lots of things that weren't included in the lower priced cruise line— e.g. excursions, unlimited wine, paid gratuities, etc. Similarly, lots of services and amenities are rolled into the monthly cost of a CCRC that aren’t part of the regular monthly cost of owning a home or renting.

As to the entry payment, take as much as possible from your low-yield cash investments to make it. Remember, many of the contingencies that you have worried about will now be covered by your new living arrangement. In addition, your other sources of income indicate that you don’t have to draw heavily on your financial assets.